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Gold Price Charts Looking Good in Dollars, But Even Better in Euros and Yen

The U.S. is currently losing in the global race to devalue currencies. Rather than falling, the dollar began moving higher relative to other major currencies late last spring when the Fed assured markets the end of QE was coming later in 2014. Until recently, metals prices suffered – at least in the U.S. The gold and silver charts look quite different if prices are denominated in euros or Japanese yen, which have been aggressively devalued by central bankers doubling down on stimulus.

Euro-dominated gold chart

Euro-denominated gold held up better during the summer and fall, and it is outperforming during the last 30 days, a period of outstanding performance in dollar terms as well. Gold’s recent outperformance relative to the dollar may be foretelling an end to the dollar’s run.

Investors should never forget there is a limit to how much dollar strength the central planners in Washington DC and at the Fed will tolerate. Already the chorus of officials concerned about the strong dollar and falling prices is growing. The likelihood of a Federal Reserve interest-rate hike around mid-year has fallen substantially in recent weeks. In fact, if the Fed is serious about weakening the dollar, they will likely do something far more significant than simply delay hiking interest rates.

Central Bankers Ready Monetary Bazookas
to Stave Off Deflation

History is littered with the corpses of failed currencies. Sometimes the host nation is destroyed in war or revolution. Spectacular hyperinflations killed others. Governments don’t much care for their borrowing and spending to be limited by the amount of physical metal in their vault, so they float paper money instead. Eventually recklessness and overreach fueled by this lack of accountability does them in.

Still, it is hard to imagine “King Dollar” meeting such a disgraceful end. But that has more to do with normalcy bias than any objective evaluation. The charts show exponential growth in debt and money creation. Confidence, the sole underpinning of the U.S. dollar, WILL eventually break, absent some extraordinary reforms.

One day, Americans may find merchants reluctant to accept dollars. The next day, they may flatly refuse. Foresighted people are preparing for that possibility. Building a stash of silver to barter and trade with is an important step. Fractional silver bullion sized coins and rounds, suitable for very small transactions such as buying a loaf of bread, can be used in ways that that one-ounce and larger products can’t.

The cost per ounce to fabricate silver rounds is higher for small denominations. That means higher buy premiums, so investors will not want to build their entire holding with these products. However, owning some “small change” is a great idea. It could easily command additional premiums if a currency crisis leads to additional demand for the smallest, most affordable units.

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